By Srinath Sridharan

Environmental, social and governance (ESG) issues concern and impact each of us, and every company irrespective of where it operates. Environmental issues range across climate change, carbon emission concerns, waste management, pollution (of all kinds). Social issues range across labour issues, modern slavery, under-the-table sourcing practices, product liabilities, information disparity, privacy aspects, data security, etc. Governance issues range across business ethics, corporate culture that shapes how a company functions and its organisational practices, board impact, enterprise risk framework, granularity of the organisation disclosures.

The term ESG was coined in 2005, in a landmark study by the UN titled Who Cares Wins. ESG refers to the three core themes in measuring the sustainability and societal impact of an investment in a company. Of late, conversations around ESG seem to be a ‘contemporary renaissance moment’.

Despite the ESG conversations being topical in India, it is yet to be seen if they make it to actual corporate and societal adoption.

Certainly, the policy attention on aspects such as skill development & education, hygiene, public health, etc, could shape public and private investments. With growing awareness amongst younger investors on the impact of a business of social development and environmental upkeep, we could expect more conversations. The 2021 Millennial and Gen Z Survey by Deloitte found: “During the pandemic, health care and unemployment topped millennials’ list of concerns. But environment remained a priority (#3 for millennials and #1 for Gen Zs ). ~40% believe that more people will commit to take action on environmental issues after the pandemic…”.

Greed is a desire to have more and more than the actual need. In the ESG journey, we must have more of its elements if GREED is defined as :

Green everything with governance
ESG assessment frameworks are shaping up to be effective in predicting long-term ability of companies to overcome, solve and monetise sustainability risks and opportunities. As green-lending gains traction, banking regulators worldwide have started to recommend adoption of ESG assessments for credit evaluation. Hopefully, India will bring this to its Net Zero project.

Rejuvenate/repair quickly
Reuse is the best green policy. Repair, resell, and reuse; keep equipments in service and out of the waste-stream. The more repair and reuse, the less trash that winds up in local landfills where suitable processing is expensive or unavailable. While it is easier and probably even fashionable to have “use and throw” objects, most of the daily-use materials are reusable.

Environment “for keeps”
Every day must be “Earth Day”. To keep our land surfaces, we cannot simply throw debris into the water—be it lakes, ponds, wells, seas, rivers or the ocean. Huge amounts of consumer plastics, metals, rubber, paper, textiles, vessels, and other lost or discarded items enter the marine environment every day. This makes marine debris one of the most widespread pollution problems facing the world’s ocean and waterways. The only solution to this problem is to prevent marine debris in the first place. We have only one planet—Earth—that we call home. We need to protect and preserve it. In this journey, all commercial activities have to factor this in mind.

Empathy for all
The simple philosophy of treating others (people, other living beings and the planet) the way you want to be treated can work wonders! Adopting green practices can reduce waste, help conserve resources, improve air and water quality and protect ecosystems.

Adopting healthy standards of governance across your daily life, including family and work, might make our societies stable. Adopting humane behaviour in all aspects of our daily lives can add positivity to our entire ESG journey.

Disclosures by default
SEBI has taken two crucial steps in this direction. First, it initiated the ‘Business Responsibility and Sustainability Reporting’ (BRSR), which is a significant step towards bringing sustainability reporting at par with financial reporting. This would be mandatory for the top-1,000 listed entities (by market cap), to be adopted from FY23.

It has also launched a public feedback system for getting inputs on how the ESG rating providers should be organised and what standardisation could be brought in to the terminologies and rating methodologies. The dependence on ESG ratings has correlation with investor protection, transparency and efficiency of markets, risk pricing, and capital allocation, among others.

If each commercial entity took up the governance aspect proactively—and in its true spirit, not just by the wording of regulations—‘disclosures by default’ can make their brand value increase.

The only way businesses benefit is if their transformation is for the benefit of their consumers and other stakeholders. To this effect, we simply have to accept that any of the transformation has to impact positively on people and this planet. We have not just inherited the planet from our previous generations, but have also borrowed it from the coming generations.

(The author is Corporate advisor & independent markets commentator. Twitter: @ssmumbai
Views expressed are personal and not necessarily that of Financial Express Online.)